Running a Business from your RV – The Basics

By: Martin M. Shenkman, CPA, MBA, JD

RV Business Issues

Running a business from your RV can be a great way to keep bringing home the bacon, stay active, keep busy, ….., all while enjoying the RV lifestyle. But don’t assume that because it’s only a “home” business that you run in your jeans and t-shirt, that you can ignore tax, legal, and other formalities. If it’s a real business, you need to treat it with the appropriate care or you’ll face tax, legal, and other woes. When planning for what might even be a small home/RV business, the rules can be quite complicated. This article will give you an overview of many of the points you need to consider. Then, future articles will explore many of these issues in greater detail and depth. Each article will try to give you some practical bottom line advice you can use.

To highlight some of the unique nuances of planning your “RV” home business they will be highlighted with the following symbol:RV

Should you Set up an Entity?

Many small businesses don’t create a separate legal entity for the business. If you provide computer consulting services out of your RV, and simply bill people directly for the work, you are operating as a sole proprietorship. You report your income and expenses on Form 1040 Schedule C of your tax return. Most businesses, especially as they grow, choose to set up an entity through which to operate the business. The primary reason for this, and one every business should consider, no matter how small, is liability. If you’re operating as a sole proprietor without an entity and someone sues you because of a business matter, every asset you own is up for grabs. If you have an entity run the business, and you adhere to all the formalities, the claimant might only reach your business assets, your rig, bank account, and other assets should remain safe. The type of business entity you should consider will be discussed in a future article. RV But, choosing a business entity might create special consideration for working RV’ers. If you own a home, have a home base, and work a large portion of the year from your home state, whatever type of entity you set up should probably be in your home state and you’ll pay taxes to your home state. RV However, if you’re a full time RV’er with no fixed home, the analysis might be different for you than for any other business owner! Yes, protecting assets by using an entity will be as important to you as any business owner. But, here’s the twist. If you set up an entity to operate your business through which state do you select? Using an entity means picking a state in which to form that entity. That may have some significant tax consequences.

Future articles will explore the types of entities to consider, formalities for the entity you choose, and more.

Uncle Sam Wants You!

Nothing like family warmth. Your Uncle Sam wants you to pay your share (or what Uncle views as your share!) of taxes on your business earnings. How you keep records, and plan can have a meaningful impact on the tax cost you’ll face. There are many tax issues to consider, including those listed below. Many of these, and others, will be discussed in future articles.

Employee versus independent contractor: What are you? If you’re an “employee,” you work primarily or entirely for one employer. You are paid on a W-2 and income taxes are withheld by the employer. If you’re an “independent contractor”, you run your own business, you hold yourself out for hire to do work for anyone, not just one employer. Those that hire you, or buy products from you simply pay you. They do not withhold taxes. You have to pay estimated taxes quarterly to the IRS instead. A really important difference between an employee and independent contractor is what types of deductions you will benefit from and how to claim them for tax purposes. Your status as an employee or independent contractor might be a contentious issue with the IRS. Many state tax authorities are quite aggressive on this matter as well. The tax authorities all tend to favor employee status so that taxes are withheld and paid. RV For RV workers, there could be an added twist of determining which state laws apply.

Deductions. Sure, every business can use ordinary and necessary business expenses to offset income it has to report to the IRS. There are rules you need to understand about what can be deducted by a business and when.RV Expenses that relate to your RV present special issues. That’s a tough one and a future article will address this issue in more depth.

Depreciation is the periodic deduction over time of something you buy that will benefit future years, a computer is an example. Generally the tax laws require that expenses that benefit future years have to be deducted (deprecated or amortized) over future years. For example, the legal and accounting fees to set up a business may have to be deducted over a specified number of years. Computer and other equipment may have to be “depreciated” over several years. What deductions are you entitled to for equipment you buy for your business? There are some very favorable incentives that might enable you to write off costs faster, perhaps even in the year you purchase the asset.

Recordkeeping to support your deductions, report your income, and document your business use of your rig, are vital to supporting the most favorable tax result possible. While tax firms often advertise how they’ll go to battle with the IRS for you, the reality is that a substantial portion of audits, and a really significant number of audits resulting in taxpayers having to pay more taxes, are the result of sloppy record keeping. RV For those operating a business from their RV there might be special considerations. You should maintain a calendar showing which days you are in which states, and which of those days you worked.

Insurance

Be certain to review your insurance coverage. If you operate a business from your RV and/or your home, you may require riders to your regular insurance. In some instances, failing to disclose and specifically insure the business operation may void your coverage for other matters. Depending on the size, scope and nature of the business you operate, you might need to carry business insurance coverage in addition to your regular automobile, mobile home, liability and other coverage.

Conclusion

An RV based business can provide many benefits: personal, financial and tax. But to enjoy these benefits you need to treat even an RV based business with the formalities and seriousness of any business. RV When these tax, legal and other concepts are grafted onto the RV “home” business, a number of complications and twists need to be addressed to best plan and protect yourself and your business. Look for future articles for more ideas.

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